Is now a smart time to buy a house? Is paying off all your debt — and losing out on tax advantages — the right move? Will food shortages REALLY hit the U.S. as hard as the rest of the world? And how prepared are Americans for a potential, coming recession? Financial expert Carol Roth, author of ‘The War On Small Business,’ gives her advice for all YOUR questions about economic instability…
Below is a rush transcript that may contain errors
GLENN: I'm concerned that small business can't continue in a country where we are teaching our kids to be risk-averse.
CAROL: It's certainly very difficult, or you get the type of entrepreneurs, who are delusional. Who think it's easy. We all know who David Hogg is, I believe. And he was complaining on Twitter the other day, how difficult it was. He tried to set up an LLC. And so difficult. Right as the government makes it so hard.
GLENN: All right. Really, welcome to the party, David.
CAROL: I know. So in a sense, it's almost a good thing. It's almost like we should have a training program, for anybody who is leaning towards socialism. Is required to start a small business. Just so they can see how difficult it is.
CAROL: But, certainly, an aversion to risk. You know, more consolidation of power, that takes away the opportunity to innovate. And all the barriers, that the government has put up, to make it more difficult, to not only start a small business. But to hire your first employee. And to allow a small business owner to succeed.
You know, it's not a good thing for economic freedom, which is one of the reasons why people come here from all over the world, to try to start that business. And live the American dream.
GLENN: So when the fed is raising the interest rates, to try to control inflation, the reason why this led to an economic boom in the '80s, is because at the same time, the government said, forget all this regulation. Just go out and start a business. Right?
Without that part of the Reagan plan, raising interest rates, while piling new regulation on. That's really a killer, isn't it?
CAROL: Yeah. If you think about the fed's options here, and what they're trying to do, in terms of slowing down the economy. Giving the backdrop we have, of this messed up labor market, and supply chain. I mean, the only way you're really getting a slower economy, in my opinion, is if small businesses and to some extent, big businesses. You know, just stop hiring altogether. And I think the small businesses, since they've had a hard time hiring, can't survive. Or other things that may get very difficult for a small business to survive.
So the well-capitalized big businesses are going to be able to withstand this rollercoaster, which benefited them on the front end. And they will coast through. You know, come out the other end, okay. And the small businesses that have been beaten up, have been closed. Didn't get the relief funds. And haven't been able to take advantage of that free debt. Because they're smaller in scale. Are really the ones that are going to suffer from all of this. Once again, Glenn. Once again.
GLENN: Yeah. So if I read this one more time, I keep reading, that the economy is -- people are spending money, like there's no tomorrow.
Because the average American just has so much money in their bank account.
I -- I know that's not true. Common sense will tell you, that's not true.
Can you please put this to bed?
CAROL: So the average, and we've talked about before, average is not necessarily the median. It's often dragged up by the wealthy, at the top end.
But the average American is in better shape, going into this potential recession or stagflation. Or whatever it is, that we're about to face, and kind of in the middle of.
Than they have been in other recessions. The personal saving rates, is around, I think 6.2. 6.3 percent. As of the end of March, which was the last number that came out.
Now, that is worse than where we were, in 2019 and 2020, going in, you know, to the pandemic decisions.
But it's not through horrible, on a historic level.
We had people pay down a lot of their credit card debt. You know, with the relief funds. And what not, that they were staying home in the pandemic. Now, that started to creep back up again.
So today, they are in better shape. But the trajectory, particularly with the inflation as we know, is eating away at that.
So I would imagine that the personal saving rate will continue to decline. We will continue to see balances increase on their credit cards, and at some points, the consumer won't have that strength, in their balance sheet, and probably will also be making decisions to just punt certain expenditures, because their poor expenditures of living every single day, have gone through the roof.
GLENN: So we have some questions come in from the audience, and I want to go over a couple of them. Steve and Mary wrote in. You find write in, by the way, GlennBeck.com/question.
I keep hearing about food shortages. Some say that famine is come. My wife and I keep arguing, back and forth. She says, this is really the rest of the world. And not us.
Yes. Food will be more expensive because of inflation, but we won't have shortages. Which one of us is right?
GLENN: Probably splitting that down the middle. Certainly there is again or some crisis across the globe. We've heard that clip that you played from the fantastic Samantha Power, who doesn't seem to care. That potentially 40 to 65 percent of the world could be food and secure, or face starvation. Because we don't have enough fertilizer.
Certainly, we are in a better position, in the United States. But it depends on things going the right way.
I mean, we've seen that we've had a bout of avian flu, that we had to contend with. You know, it depends on crop yields. It depends on our government, not just doing stupid things, and we're seeing them pulling -- you know, feed out of -- you know, of the farm, in order to put it into gasoline, so that they don't have to drill for more oil.
I mean, they don't make the best decisions.
So I wouldn't say, that there isn't a possibility, that we're going to have issues here. Because I think there is that possibility. It just probably isn't as stark, as it is, in the rest of the world.
That being said, nobody has ever been upset for being too prepared. So be prepared for that. Worst-case scenario.
GLENN: Ron in New York wrote.
I think my job is secure.
But so did my grandfather. Or my great grandfather during the Great Depression. How do we know what's coming?
What's the difference? And how do we prepare?
Is it smart for me to buy a house at this point?
CAROL: So, again, this is not financial advice. Just some food for thought for you. It really depends on your personal, financial situation.
You know, if you were somebody who is still sort of living paycheck to paycheck, or building up your reserves. We don't know, what is coming down the pike.
You know, there are a lot of issues. The big thing right now, geopolitically is, you know, are these stupid statements from the Biden administration going to pull us into some sort of a nuclear war. At that point, you know, all bets are off.
If we're just looking at sort of the inflation picture, and the recession, I think the one benefit that we do have is that we have so few people in the labor market. Now, granted, it may get many people off the sidelines, if they see their 401(k)s shrinking, and have to deal with more inflation. But if you have a job, that you're secure in. You are probably in a better position, but it's always good, to kind of think through, what are your second and third options. What could you do, if that worst-case scenario comes about?
And, again, look at the sort of risk/reward, on the home front situation. We're underbuilt, as a nation, in terms of homes. And that is long-term probably going to support housing prices. But it doesn't mean that there won't be some variability in the meantime, especially with the increase, in mortgage rates.
So I would just spend a lot of time, doing the little pros and cons and putting that plan together. For your plan B and plan C. And wish you a ton of success.
GLENN: I remember my parents, again, the small business.
In the '70s. It was a nightmare. Because it was a lot like this. What are you -- what do you think is coming?
Is it like the 1970s? And it just stays like this? I mean, nobody knows, you know what I mean?
Americans have no benchmark.
GLENN: Yeah. Yeah. But no benchmark to go back and go, it will be like this. We've never seen this.
CAROL: No. There are just a number of factors, that are all coming together. And as I said, I think that geopolitical wild card is the -- is the biggest wild card right now. Assuming that we can get that peace under control. Because as I said, if that goes off the rails, all bets are off here. I think the likelihood is that we see a recession, but because of the way, the recession has come out. And some of the opener weird things that are happening in the economy. I think at least, in the United States.
It's probably a shallower recession. Than we have seen, you know, in previous periods.
Not to say, that that won't cause real pain for people. It will. There will be people, probably who lose their jobs. Small businesses will end up closing.
But I don't think -- I think that it will be shorter in duration, you know, than it otherwise would have been if we didn't have some of these other structural issues going on at the same time.
Fingers crossed. But, you know, there are a number of factors here, the fed between raising rates, and shrinking their balance sheets. The geopolitical issues. And some of the issues that we're contending with. That's just sort of a best guess right now. But we have to stay on top of this realtime. Because things could change quickly.